Circular Merger


DEFINITION of 'Circular Merger'

A transaction to combine companies that operate within the same general market but offer a different product mix. A circular merger is one of the three types of mergers, the other two types being vertical and horizontal mergers. A company engages in a circular merger to offer a greater range of products or services within their market.

BREAKING DOWN 'Circular Merger'

A circular merger can be risky if the acquiring company does not have specific expertise within the targeted market segment. Sometimes, expanding offerings too far from the company's expertise can lead to greater inefficiency, rather than the economies of scale that are often hoped for. However, the acquiring company can benefit from economies of scale and the sharing of distribution channels.

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  1. How long does it take to execute an M&A deal?

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  3. What are some ways to make a distribution channel more efficient?

    While there are many ways to make a distribution channel more efficient, the three high-level ways to increase the efficiency ... Read Full Answer >>
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  5. How does a company record profits using the equity method?

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    In a horizontal integration, a company either acquires another company or merges with that company. This allows the resulting ... Read Full Answer >>

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